Posts

Wednesday 3rd December was the last McHugh & Co auction of 2014. Focusing on residential property in London this auction gives a good indication of the state of the London property market.

PropVestment attended the auction on the instruction of client’s interested in some of the lots on offer. Here is how it went:

Key observations:

Only 50% of the lots sold

Development lots sold the best, 5 of the 8 sold, at an average of £1.865m which was on average 55% above the guide price.

Houses did not sell well, only 3 of 9 selling, at an average of £499k, on average 17% above guide price. For the ones that did not sell, reserves were not met at an average of 3% above guide price.

Flats sold fairly well, 6 out of 10, at an average of 34% over guide price.

Lots in Zone 1 & 2 sold well and above guide, however many outside central areas did not sell.

Lots sold by councils, or trusts sold well, where as private sellers seemed to keep high reserves.

London property analysis

Developers were hungry for prime development lots in good locations, where there is confidence that final products will sell and where there is potential to achieve higher values. However locations away from prime residence or commercial zones did not fair so well. Some lots were offered by London Borough of Camden, the ones on normal residential streets sold well, but ones in proximity to estates and tower blocks did not. Council are cashing in.

Flats sold well, these are properties that are more affordable and hence there is greater demand.

Luxury houses suffered, where sellers are anticipating very high prices. The irony is that with the Stamp Duty announcement in the Autumn Statment these properties will be less desirable and therefore sellers will not achieve the prices they want.

Another factor that may contribute to slower sales is the up coming holiday season, with many auction lots requiring 4 week completions it is not desirable or possible to complete. Auction purchases require greater legal scrutiny and finance is still difficult.

For advise, appraisals or general consultancy on London property feel free to get in touch: info@PropVestment.com

Note: PropVestment only attended the first 30 lots on offer, data is from first hand observation, although we aim to provide accurate information this information is not verified with McHugh and Co.

Is the role of the Estate Agent changing?

Over the last few years since the bursting of the property bubble in 2007 to now the role and business model of the estate agent has changed dramatically. We will discuss a few themes from the rise and reliance of the internet in property. Most prominently the rise and almost necessity of agents to list upon Rightmove and Zoopla. Are relationships with your agent still as important? The rise of volume of estate agents on every high street? Is it different if you are a buyer or a seller.

A few years ago there was a giant called Findaproperty.com, which has now disappeared after a merger with Zoopla in 2012. The giants are now Rightmove and Zoopla. Nearly every high street agent must now list on these two giants to get the exposure to potential buyers or letters.

In times gone by majority of the advertising for property was in the freely distributed local newspapers, and newspaper could get a large amount of their revenues from estate agents. Now many papers exist in only online form or only sold in selected stores. This has meant that all that revenue is diverted to these online property listing sites. Within minutes of receiving new properties agents are able to list them online and mailshot them to potentials. As a buyer this means you have quick access but also quick competition.

DID YOU KNOW: 95% property searches are done online!

There are now a rise of many online only estate agents such as such as eMoov.co.uk, Housesimple.co.uk and Hatched.co.uk. Zoopla and Rightmove online allow estate agents to advertise, not private clients. Hence their is a market for online only agents. With minimal costs they can operate, some only charging £500 commission on property sales. Compared to the 2% average of traditional agents and London average house prices hitting almost £350,000. That’s a comparison of £500 vs £7000? What would you choose?

Are relationships with your estate agent important?

This question goes hand in hand with the debate of using online only estate agents or not. In years gone by your relationship with your local agents were of prime importance. Whether you were a seller or a buyer your agent could significantly improve your chances of succeeding in a transaction or even giving you first option ahead of others.

Recently working on a deal for a client we realised the importance of this relationship is still as valid as ever. You pay a price but you get that call ahead of a property being listed online. Or as a seller they personally take care of negotiations and vetting to squeeze every penny from the prospective buyer. It brings about a personal touch an art that is often lost in today’s technologically reliant world.

Spoilt for choice? But which one?

Since the before the bubble burst till now there have been more and more new estate agents cropping up on every high street in the country. Even when the market for buying and selling was stagnant they were opening. Mainly for the high demand for lettings and the quick 6-10% that they could make by flooding landlords with sub standard tenants and then in an few months they disappeared. Estate agency requires no qualifications to open, so there is easy entry. But do not discount them all the new boys on the market. There are some very good ones. Best advise is to go and have a conversation, you very easily can weed out the all talkers and the ones with extensive local knowledge.

The best agents we find are ones that have been in an area for a while, they get the best properties first and they also have the ready clients who are looking.

Difference for Buyers and Sellers

For buyers:
Walk around the area you are looking and register interest with the local estate agents. They will give you inside knowledge of the happenings and developments locally and can give you first option. You are not generally paying anything so it makes no difference to you.

For sellers:
You are the one paying fees so this is the big dilemma. Also it depends on your circumstances, how long you can wait to find a buyer, can you handle viewings. A good agent can vet out prospects so there is less hassle for you, especially if you are selling your residential home and do not want hoards of random people turning up to see.

Conclusion

Estate Agents are massively important for the buyer and seller, however each situation is different. On the whole good relationships enable you to get preferential and personal service that can help you beat the market.

https://i0.wp.com/www.propvestment.com/wp-content/uploads/2014/01/zoopla-v-rightmove.jpg?fit=441%2C500500441Niravhttp://www.propvestment.com/wp-content/uploads/2016/03/Propvestment-logo-6-1030x807.jpgNirav2014-01-27 15:20:092014-01-27 15:20:09How important is the Estate Agent?

Property Highlights

Capital Gains Tax loophole closed

From April 2015, overseas investors will face a capital gains tax bill on any profits they make from UK property. It is only fair to make overseas investors pay capital gains tax (28%) on the profit they make when they sell their UK properties. That is what British second homeowners are required to do, so why not foreign investors too.

£1bn made available for property development loans

£1 billion of loan money is to be made available to councils wanting to fund new housing developments in Manchester, Leeds and elsewhere (expected to create 250,000 homes). House building is up by 29% on last year. It is a figure warmly welcomed by construction firms such as Persimmon, Barratt and Taylor Wimpey, though many large financial firms such as L&G insist house building should be a much higher and more urgent priority.

Aim to keep interest rates low

The aim of many tight regulations in banking and financial industries is to encourage responsible lending and so it is possible to maintain low interest rates. This is vital to the general economy and must be fought against rising house prices. So house prices will need to be kept under control.

What does this mean for a property investor?

Firstly if you are a foreign investor then much of the benefit you got have been diminished. However if you are not, this is great news. It will mean that foreign investors may start to put there money else where. This means there will be less competition from “Cash Oversea’s buyers” when you are after a property. Prices should also correct accordingly. Overall a good policy for UK property buyers and also the increased tax revenue will help the public too.

Funding for house building and developments will increase housing supply and keep construction jobs strong. However will this only benefit the house builders who sell at inflated prices? Possibly. The impact on the normal UK property investor will be minimal.

Low interest rates are welcome for investors, however it depends if new finance is available. Overall it will at least mean that investors’ current mortgage payments stay low.

The UK property bubble is building

The average family home is up £5,583 and London properties have increased by more than £7,000.UK property prices went up by £7,430 in October

Average sale price in London is now £404,199

Help to Buy scheme is inflating prices

Rents increase 11% to £785pm, 41% of the average UK wage.

In London, where the average sale price is higher than ever, 14 people compete for every property.

Mortgage applications rose by 6% in October, and almost double 2012 numbers. It comes as the Council of Mortgage Lenders said last week the number of homes sold this year will be more than one million for the first time since the financial crisis began in 2007.

Out of the 5,375 sold so far, the highest number of Help to Buy sales have been in Leeds, Wiltshire, Milton Keynes and Reading.

The average price of a UK property bought under the Help to Buy scheme was £194,167, with an average equity loan of £38,703.

Critics warned the UK-wide second phase of the scheme, which began last month and is not restricted to new-builds, would cause a housing bubble.

It guarantees 15 % of the value of the home loan.

After almost coming off the market, Buy to Let mortgages are also being approved strongly. Landlords and investors are buying up and completing deals to keep up with the increasing rent demand and to cash in on the rental increases. This is a very encouraging sign for property investment.

However as the final graphic shows there is still not enough supply in the market, especially in London where there are almost 3 offers for every sale.

PropVestment’s thoughts

Yes the UK property market is picking up and in fact picking up a little too fast. But this is mainly due to the Help to Buy scheme which is resulting in unrealistic implications on price and the market. The only ones to benefit are the banks and house builders. First time buyers, buying under the scheme face higher interest rates compared to traditional mortgage products. The market right now is too competitive and sellers can take advantage. We do however have concerns that many first time buyers under Help to Buy will suffer from negative equity in years to come once the Government pulls the plug on the scheme and prices fall back to their realistic, natural and sustainable level.

With the announcement of the HS2 today, there has been much in the media, with a lot of criticism. We at PropVestment want to focus on the implications of HS2 on the UK property market.

Economically this will create jobs and provided technology is sourced within the UK will benefit us in the long run.

In terms of the thousand or so homes effected, we believe they have been offered 110% the market value of their property prior to plans announced. Home owners have got a good deal, especially in some northern reaches where the UK property market is almost non existent as UK potentially drops into a “triple dip” recession.

How does HS2 effect the UK Property Market?

Reduce Pressure on London
As commuting becomes easier with journeys under an hour from Birmingham to London, similar to a journey from Zone 4/5 to Zone one within London. Therefore many will choose to locate outside London. Benefiting from lower property prices and potentially larger homes.

Revival of Northern Property MarketsAs from locations will be commutable to the major cities and London. Hence more people will choose to locate in those towns, boosting house demand and rentals too. Landlord’s and investors will find these areas as more attractive places to invest. First time buyers and young professionals out priced by London have the option of settling in Manchester, Sheffield, Leeds or Birmingham and able to travel more easily.

Revival of UK Construction
It is inevitable that there will be need for new home and in the areas surrounding the HS2. Primarily for the construction workers and secondary for the end users who look to make use of the HS2 rail link.

UK Property 2013 – House Prices, Lending, Supply, Rents…

There is always much speculation about how the UK property market will fair when we start a new year. How will the market correlate to the economy as a whole, and the biggest question of all is whether its recovering from the credit crunch?

House Prices

Lending

Supply

Rents

UK House Prices in 2013

House prices are low currently and the advise from PropVestment is that property prices will not stay low forever. Simple demand and supply, population is growing faster than new supply, together with smaller family units means shortage. Further lending is still tight but there is major pressure to improve. If you can afford to buy now, do it.

Today Rightmove are claiming that sellers are pricing 0.2% higher in 2013

UK Property Lending in 2013

Lending to first time home buyers in the UK increased 11% in 2012 compared to 2011, however this is still considerably lower than pre credit crunch. There is constant pressure on lenders to lend more but the criteria remains tight. Hopefully 2013 will mean more realistic and universal schemes rolled out by lenders, with more scope than last years NewBuy and FirstBuy.

Why First Time Buyers find it hard to buy in London

High Prices

Shortage of Properties

Difficult lending

SOLUTION – Sell council properties in Zone 1 & 2

This article discusses the various issues in the London housing market, addressing high property prices, housing shortages and high rentals. Linking these factors to the reasons why first time buyers are facing an uphill struggle.

I have lived in London my whole life and professionally work in the property industry with my company PropVestment. The aim is to provide information, analysis and property related services for investors. From my experiences in this field and from living in London my whole I make some observations.

First Time Buyers Problem:

Too high prices and shortage of properties

The first thing that caught my eye this week was an article titled “London councils breaking B&B stay limit for families” on the BBC News website. The main thing I understood from this article is that Westminster council has broken the law by not housing 134 families into housing and not B&Bs within 6 weeks. The main take on the article as reported is housing shortage.
However, why are there so many demanding housing in Westminster, arguable the most expensive borough. Surely if you are in need of accommodation you should take or be given where available and not be given location preferences.

https://i1.wp.com/www.propvestment.com/wp-content/uploads/2012/12/council.jpg?fit=380%2C253253380Niravhttp://www.propvestment.com/wp-content/uploads/2016/03/Propvestment-logo-6-1030x807.jpgNirav2012-12-14 15:52:232013-01-29 09:36:06London’s housing problem for First Time Buyers

Today Monday 12th March the NewBuy scheme was launched.
The NewBuy scheme assists buyers who have a deposit of at least 5 per cent to buy a new build home. This is a smaller deposit than is normally required. The scheme will allow more borrowers to secure up to a 95 per cent Loan to Value mortgage on new build residential properties from participating builders in England.

What NewBuy means for FTBs

The Government is backing the scheme to help those home buyers who have found themselves excluded from sections of the market because they don’t have a large enough deposit.
NewBuy is expected to assist up to 100,000 households in buying a new home. All mortgage lenders and house builders operating in England are welcome to join the scheme.
But like many other schemes before, will this actually have a significant impact on the property buyer and will it mean first time buyers are helped.

How NewBuy works?

Developers pay the lender 3.5% of the purchase price of a new-build property, while the government provides an additional guarantee of 5.5%, allowing mortgage providers to lend to people with a lower deposit than they would normally need as it reduces the risk.
This effectively means the lender lends a maximum of 91.5% LTV but is secured with an extra 5.5% from the Government.
The scheme should increase the availability of mortgages with a high loan-to-value (LTV) and the government says it will help up to 100,000 first-time buyers.

Do you qualify?

The scheme applies to buyers of new-build homes in England if the developer is taking part in the scheme.

The purchase price must be £500,000 or less

It must be a standard purchase (ie not shared equity or shared ownership),

It must be the buyer’s main home rather than a second property or one that will be rented out. Although aimed at helping people on to the housing ladder, the scheme is not exclusively for first-time buyers.

You only qualify if you have a minimum of 5% for the deposit.

Which lenders and builders have signed up to NewBuy?

Nationwide building society, NatWest and Barclays have already signed up, with others expected to follow suit, including Halifax by April and Santander by the middle of the year. Construction companies including Barratt, Bovis, Bellway, Linden Homes, Persimmon, Redrow and Taylor Wimpey have signed up.
Barclays is offering 95% LTV mortgages at 4.99% fixed for two years and 5.89% fixed for four years; Nationwide is offering 95% LTV mortgages at 5.69% fixed for three years and 5.99% fixed for five years; NatWest will offer 95% LTV mortgages at 4.29% fixed for two years and 4.99% fixed for five years.

PropVestment’s Thoughts

Firstly the property market is down by upto 50,000 transactions a month, thats 600,000 a year compared to the peak in the property market a few years ago. So even if the full 100,000 NewBuy properties are reached, it will not have a major impact on the market as a whole.

The scheme only helps buyers of new builds, these are not the most desirable properties, often built very fast, with out fine finishing. These properties are clones of each other and often lose significant value when it come to resell. The price is set by the builder, they will just inflate the original asking price so the 3.5% contribution by them is a false reality.

Although major lenders have signed up there is no indication of how many of these products they will allow or how tight other criteria may be. There may be a significant difference in the volume of NewBuy Mortgage approvals to actual potential properties in the scheme.

Finally what will be the location of these NewBuy properties, will we see small NewBuy villages full of first time buyers in indentical homes?

Overall PropVestment welcomes such schemes and it is a positive move by the Government, but like other schemes before we doubt there will be a significant impact in reality.
It will be more a headliner to make the government look like they are helping first time buyers.

https://i0.wp.com/www.propvestment.com/wp-content/uploads/2012/03/newbuy.jpg?fit=546%2C180180546Niravhttp://www.propvestment.com/wp-content/uploads/2016/03/Propvestment-logo-6-1030x807.jpgNirav2012-03-12 18:45:252013-01-29 09:07:18NewBuy scheme: What it means for first time buyers

On Monday 6th February 2012 PropVestment paid a visit to Barnard Marcus residential property auction at Grand Connaught Rooms in London. We were in for a surprise as we were there as a buyer but soon found auctions are now for selling.
This was the first major property auction of 2012 in London. Thus it was pack out, many experienced and new property buyers in the hall.

Auctions are for buying not selling now

Lot 1 had guide of £800,000, a four bed house in Battersea, it went for £1.28m + 2.75% fees. This was the story of all the first twenty or so lots.
All the first 23 lots were in London, the average winning bid was over 30% above the guide price, taking out 5 where even at this level the Reserve was not met, the other 18 properties sold at over 36% above guide price.

A few other key high lights from this auction:

Most land only deals did not sell, reserve not met

A piece of land without planning permission for a possible 8 units went for £860k, that’s insane for the area, almost £110k land cost then planning then construction.

Most of the lots on by order of Mortgage companies got bids over guide however did not sell due to Reserve Not Met (RNM). This can only be the case as the lenders have over valued in the past and now face negative equity. Failures.

Properties in North England and Wales were the hardest sale, many RNM and a few with highest bids well under guide prices.

PropVestment Conclusions: Auctions are now for selling

Property Auctions have changed now, its a much more public affair and it seems that its no longer a place where you can pick up a bargain. The sellers use it to sell properties that otherwise will not fetch a similar price through traditional means such as local agents. This tell us something about the quality of the properties and legalities of them. There were many amendments to the information provided with particular importance on certain higher rentals, those properties were on the day changed to vacant possession. Therefore the guide rental was incorrect, how is one to know what the real rentability of a property is without doing thorough research.
Due to these pit fall, an auction is no longer a place for inexperienced or first time buyers to find a property to buy. Auction are now for selling.
Rather it is a place where landlords can easily offload not so good properties and rely on the ignorance or lack of research of bidders.

PropVestment Auction AdviceBuyers – Do your thorough research and get someone to look at the legal documents prior to bidding.Sellers – Use auctions to sell unwanted properties, especially in London, everything sells

http://www.propvestment.com/wp-content/uploads/2016/03/Propvestment-logo-6-1030x807.jpg00Niravhttp://www.propvestment.com/wp-content/uploads/2016/03/Propvestment-logo-6-1030x807.jpgNirav2012-02-13 10:07:252013-02-28 16:51:56Auctions are now for selling rather than buying property

– Public Confidence

– Lending

Public Confidence

Market activity is dependant on a few things, firstly public confidence, this has seen a recent resurgence with many agents claiming great interest and newly registered clients in the post Christmas period. People property search in agents as certain sectors start to turn around or the fact that the public know that interest rates are likely to stay low for the near future, houses start to seem affordable again. Together with the fact that many news sources are predicting higher rents on the market this year, a general upward trend is only exaggerated due to the Jubilee and Olympics.
Therefore buying sounds like a good option.

According to estate agents, the typical number of house hunters registered per branch in December was 294, 32 more than the average figure for November, with viewings continuing right up until the Christmas break, the National Association of Estate Agents (NAEA) found.
The percentage of first-time buyers also rose to 21% , continuing the increase since this section of the market hit its lowest proportion in nearly three years last autumn, although first-time buyers made up a quarter of the market during the same period last year

London was the only area to see price increases in December while respondents in the West Midlands and Yorkshire and Humberside reported the biggest drops.
At the same time, new instructions edged up for the third consecutive month during December, with 12% more respondents reporting rises in homes coming onto the market.
London saw the greatest increase in supply, with 38% more surveyors reporting a rise – the highest figure since January 2005

Lending

However there is a second all important component of buying a new property as well as confidence and interest is mortgage aspect. New lending is still very low and the stricter criteria means that even though people want to buy and sell, this is becoming the stumbling block, and as a result the sales are at one of the lowest points at the moment.

Transaction levels are likely to see a slight resurgence in 2012 and climb back to around 880,000, roughly the level of activity recorded in 2010. However, to put this in context, total sales in 2006 were almost double this amount at 1.67 million.

The weak economic picture anticipated for the next six months, along with the prospect of increased unemployment, means that demand to purchase property is unlikely to see any significant increase and will remain relatively flat.

Commentators and analysts expect sales to stay low – perhaps even lower than they have been in the past year. That means 2011’s eventual total might even be lower than 2009’s figure of 859,000 sales for the whole year – the lowest since modern transaction records began in 1978.
Even the reluctance of lenders to repossess many of the borrowers who are now in arrears has played its part.
With tens of thousands fewer homes being repossessed than lenders had predicted just a couple of years ago, the market has been deprived of the cheap homes that would otherwise have been put up for sale.

PropVestment Conclusion

The public are ready, investors are ready, the financial institutions are holding the property market back.